Urban Economics

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From the discussion, it seems that the median location model can explain the creation of urban cities. It is beneficial for the industry to locate in the median in order to minimize the cost of the production and it can also serve the customers quite well.


Instead, if the firm is situated at the median location, it will lower down the cost of production and it can also serve the customers. Moreover, producing from more locations does not allow the firms take advantage from scale economies. Per unit costs of the production also decreases with the increase in the size of the firm, as Average Cost of Production is equal to the Total Cost of Production divided by the Output.

Right from the time human beings have started inhabiting in the caves, they have been analyzing the effectiveness of various locational decisions. It includes factories, retail outlets, warehouses, hospitals, bus stops, educational institutes, automobile stations; just to name a few of them. This ubiquity of locational designing has led to the interest of many in locational analysis. P-median model is the most popular and most widely used location-allocation models. (John Current, Mark Daskin and David Schilling, n.d.)

The idea of conditional location problem is to locate the p amount of facilities in order to serve a particular set of demand points, assuming that q facilities are already located. When q tends to zero, there is unconditional problem. Therefore, it can be inferred that the median location model is able to explain the geographical distribution of the automobile assembly plants near the eastern, north eastern and south eastern regions of United States of America. ...
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